Traditionally, all National Finance
Commission (NFC) awards have been imposed by the central government mainly due
to the reasons that provinces could not develop consensus in the past over
distribution of resources.

In past, due attention could not be
paid vis-‡-vis fair and just distribution of fiscal resources among the
federating units. Despite the expiry of its five-year term in 2002, the 1997 NFC
award remained in force with some minor amendments introduced unilaterally by
the then President Pervez Musharraf.

The decision that has to be taken in
2002 lingered on until 2006 when President General Musharraf announced an
interim award. Under the temporary award, the provincial shares in the divisible
pool were raised to 41.5 percent in fiscal 2006-07 and a gradual increase to
46.25 percent by 2010-11 was envisaged. The provinces' demands were partially
fulfilled by increasing subventions or grants-in-aid for them. A permanent award
is, however, still awaited.

The NFC is a constitutional body and
all its decision should have mandate of all parties concerned. The formula
Musharraf amended under Article 160 (6) of the Constitution mainly increased
subvention amount for the provinces, enabling them to obtain additional amount
for catering their financial needs. The smaller provinces Balochistan, Sindh and
NWFP were not so much happy with the formula presented by Pervez Musharraf
because they wanted to increase their share in the federal divisible pool (FDP)
and accommodation of their viewpoints by giving weightage to indicators of
revenue generation, poverty, and inverse population density. The main complaint
of the provinces was again on the adoption of single criteria of population for
distributing the financial resources among the provinces.

Now when the PPP led coalition
government is running the state affairs at the centre, besides having coalition
governments in the four provinces, there are high expectations that the
democratic government would be able to develop consensus.

A meeting of NFC Award was held
recently in Islamabad with Finance Minister Shaukat Tarin in the chair. The
meeting agreed agenda for the National Finance Commission Award that is expected
to be finalized soon. The meeting was also attended by all four provincial
finance ministers, and economic analysts including members of the commission,
Abdul Ghafoor Mirza (Punjab), Dr. Kaiser Bengali (Sindh), Senator Haji Muhammad
Adeel (NWFP), and Dr.Gulfaraz Ahmad (Balochistan).

Now meetings of the NFC would also be
held in small provinces starting from Quetta to Peshawar to Karachi and Lahore.
The final meeting to decide the NFC award would be held in the finance ministry
in the capital.

The central government's stand is that
resources should be distributed under formula of population and revenue
collection. However, leadership of the Pakistan Muslim League-Nawaz (PML-N) has
shown flexibility on the Punjab government's stance in order to please small
provinces, which have expressed their dissatisfactions over distribution of
resources on single criterion.

Sources in the PML-N told this scribe
that the Punjab government would have no objection if formula for NFC Award is
reviewed with the consensus of the provincial governments and the federation.

"The Punjab government and PML-N would
support every formula which could satisfy all stockholders and further
strengthen unity among the federating units and the communities of the country,"
the sources said.

Fiscal decentralization envisaged under
the NFC is an issue of prime national importance and the government must
understand the significance and principles of fiscal federalism. The unfair
distribution of monetary assets is one of the foremost causes for the political
and social unrest in the deprived provinces, experts told this correspondent.

According to them, the NFC Award is the
distribution of financial resources among the provinces of Pakistan by the
federal government. Certain types of taxes including income tax, general sales
tax, wealth tax, and custom duties etc., collected in each province are pooled
and then redistributed according to the NFC formula.

Most tax receipts are collected from
Punjab and Sindh. They said the provinces have raised their concerns over the
unfair (both vertical and horizontal) distributions and the deliberate delay in
working out a resource distribution formula by the central government.

According to experts, the NFC is linked
to two major issues that have to be addressed including the vertical and
horizontal distribution of financial resources. Vertical imbalance arises from
the centralisation of revenue collection with the federal government and
excessive dependence of provincial governments on federal transfers. However,
the disproportionate horizontal distribution of resources on the basis of
population results in disparities in the capacities and needs of the provinces
and in the relative costs of development and the provision of public services.

According to Finance Minister Shaukat
Tarin, the government is committed to remove sense of deprivation from the
provinces, as "It is our wish to care the small provinces while distributing the
award".

It was federation's first and foremost
duty to remove the sense of deprivation prevailing among the people of small
provinces. The sense of deprivation can only be removed when the larger
provinces will show their open heartedness while taking their due share in
distribution of NFC Award.

Financial experts are of the view that
the government must broaden resource distribution base by encompassing
disparities like human development index, inverse population density, and
revenue generation in a particular province in factors that determine how much
money will go to a federating unit.

The size of federal divisible pool
needs to be broadened by injecting more money into it out of the federal
government share in total revenue collection. Through this, particular needs of
province could be met without objection of others, they said.

According to Dr Shahid Kardar, the
government needs to ensure availability of maximum funds for provinces in
vertical distribution. He also advocated the addition of backwardness, revenue
generation, inverse population density along with population in factors to
determine horizontal distribution (among provinces) to make new NFC award
acceptable to all federating units. The distribution of funds from the center to
provinces and among themselves has long been a threat to a 'fragile' provincial
harmony in Pakistan.

He said that a permanent NFC Award
according to the aspirations of provinces was imperative to keep the federation
united and help it grow stronger. Other experts called for changing the criteria
of NFC award, which should incorporate the backwardness, and poverty of the
province, instead of only population of the provinces. The uplift of the people
is impossible until the provinces are given control of their resources. On the
other hand, civil society representatives are of the view that if the newly
elected government genuinely wants to redress the grievances of the smaller
provinces and get rid of the unjust policies of past regimes, it should come up
with a universally accepted and justified policy of resource distribution.

As signatories of the Charter of
Democracy, the PPP and the PML-N are morally duty-bound to announce a fresh,
justified and consensus powered NFC award, they insisted.